Ecobank has opened a new branch in Upper Hill, taking up space at Shelter Afrique House, to tap into opportunities presented by organisations moving into the commercial district bordering the CBD. A growing number of local and multi-nationals are establishing head offices in the commercial centre as Nairobi emerges as a top city for new investments into East Africa. “Upper Hill is a fast growing commercial area with almost all financial service providers angling for the emerging SME and corporate pie that businesses operating there have to offer,” said managing director Tony Okpanachi.

Nairobi is East Africa’s largest city with a population of over three million, and the busiest airport (JKIA) in the region, that serves about five million travellers every year. The city is under pressure to meet the demand for both office and residential space as the CBD becomes overcrowded, with relatively high occupancy rates amid high rental prices.

The demand has seen satellite commercial centres such as Westlands, Kilimani and Mombasa Road emerge as favourite locations away from CBD’s congestion. A growing number of international organisations are moving to Upper Hill as most seek a pivot base into the regional market. “Most multinationals consider a population of 140 million when moving into a region. East Africa region has a population in excess of 200 million including that of new member nations. This gives Nairobi an advantage as big players come in,” said Timothy Mutisya, a property manager at Lloyd Masika which manages and has sold a number of properties in Upper Hill.

The branch is Ecobank’s 21st in its expansion bid. It opened another branch in Meru town recently and plans two more in Nairobi before end year and additional ones in select counties. Ecobank ventured into the Kenya market in June 2008 after acquiring the former East Africa Building Society (EABS).

Investors will be invited to provide rolling stock such as trains and high capacity buses under the Nairobi Metropolitan Mass Rapid Transport System (MRTS) set to start next year.

Transport minister Amos Kimunya said on Wednesday the government would only build the 167-kilometre public road and rail network, leaving private companies to manage the services.

“Our focus on this project would be laying of infrastructure such as roads, railway and commuter termini but leave the rest such as the trains and buses to the private sector to handle,” Mr Kimunya said when he met a delegation of investors from Japan in Nairobi.

'The grid will link the city centre with key neighbouring towns and municipalities such as Kikuyu, Thika, Ruiru, Athi River, Kitengela, Machakos, Limuru and Kajiado.

The Nairobi Railway Station area, including the yards, has been proposed for the construction of a 24-storey central hub terminal for the transport system where all lines would originate or terminate.

A blueprint presented to the government showed the road network would be serviced by an exclusive closed rapid bus system complete with special feeder services.

The special bus routes will run alongside the normal highways except within the Central Business District (CBD) where it would be elevated.

An estimated 378 buses would be required to operate this exclusive route service by 2015 with fares estimated at between Sh2 and Sh2.50 per passenger per kilometre.

The rail network is proposed to be on an elevated platform with a total of 76 stations and five maintenance depots.

“The operations of train and buses services will be left in the hands of the private sector” Mr Kimunya said, adding that diesel-powered trains would be initially used in the project that seeks to save commuters from biting traffic jams.

“For a start we will stick to diesel-powered trains until we sort out capacity issues in our national power grid. We don’t want to deny other sectors growth by taking all the power to trains,” he said.

Property developers and professionals in the industry now want a review of planning laws affecting urban areas to unlock optimal land use and lower cost of housing. They say the remedy is to increase the plot ratio which allows the developer to increase the vertical space on which to build more housing units. This will give a reasonable return on investment, which consequently will work towards affordable housing.

Grace Wakaba, the director of International Valuers, a Nairobi-based valuer and estate agent, says planning policy reviews should focus on redeveloping low density and sub-optimally utilised areas as well as derelict land. “With the infinite land use resource, the scope of choice in urban areas should entail densification, infilling, intensification of land use or redevelopment of low density areas, sub-optimally utilised land and derelict land,” said Wakaba.

Wakaba said the review of planning laws to get rid of low density housing zones will bring down the cost of housing. “It will make housing affordable to more people and make it possible to house more families,” she said. “It will also help conserve lands not originally planned for residential use, stop encroachment into the sub-urban areas and maintain the greenery. And because land supply is largely fixed, there is every reason to maximize its use both vertically and horizontally in order to achieve its optimal use.”

Players in the property market say there is an urgent need to co-ordinate urban growth, and develop and improve infrastructure to cope with demands of urbanisation. It is projected that about 32 per cent of Kenya’s total population now lives in urban areas. Rising demand for land and housing areas has seen prices sky-rocket and analysts now predict a bubble in land prices as they face correction.

Land prices, which account for the most cost in house pricing, have more than doubled in Nairobi in the last five years. This has seen property developers concentrate on the middle and high income segments of the property market which are more lucrative. This has seen cumulative demand for housing in urban areas rise to over two million units in the last two years, with a vast segment of lower middle and low income earners left unsupplied.

Annual demand for housing in urban areas is currently estimated at over 200,000 units. “Over 80 per cent of new houses supplied in the market are for the high and upper middle income earners yet the greatest demand is for low income and lower middle income that constitute 83 per cent of total demand,” said Mentor Holdings executive director Daniel Ojijo. “A lot more needs to be done besides the incentives already extended by the State to the housing sector to create growth in the lower end,” said Ojijo.

Private companies will be contracted to manage and maintain the new Thika highway, the Daily Nation has reported, citing a senior Roads ministry official.

The Kenya National Highways Authority (Kenha) director general Meshack Kidenda was quoted as saying that the agency has no capacity to maintain the superhighway and it will therefore contract private companies to do the work.

“The short-term maintenance of the road would involve repairing broken road signs and clearing drainages with the long-term works involving fixing potholes,” Mr Kidenda told journalists shortly after addressing a stakeholders’ forum hosted by the Kenya Alliance of Resident Associations (Kara) in Nairobi.

Mr Kidenda said Kenha will soon be advertising opportunities for businesses to tender for contracts to maintain the highway. Kenyan roads are usually maintained by local authorities or the Ministry of Roads.

Thika Road expansion project kicked off in April 2009 and is scheduled for completion by March 2012 at an estimated Sh36.5 billion.

The project was initially estimated to cost Sh27 billion but the cost has since gone up by about 35 per cent due to materials price escalation occasioned by the depreciation of the Kenyan shilling.

The expansion of Thika Road from a four-lane to an eight-lane superhighway with numerous interchanges and flyovers is expected to reduce the time it takes to travel between Thika and Nairobi from two hours to half an hour.

Nairobi’s status as a conference and business travel hub has attracted six new top-end hotels, promising to add 800 beds to the circuit that has been grappling with limited capacity.

Hemingways Collection, SAMCO Holdings, Simba Group, Rezidor Group of Hotels, and the Red Cross are some of the investors who are putting up new properties that would add at least 800 beds into the market.

The new hotels are looking to cash in on the growth in the tourism that has led to an increased demand for bed capacity in the city, mainly driven by conference and business.

“The demand is high in Nairobi,” said Mr Mike Macharia, the chief executive of Kenya Association of Hotel Keepers and Caterers. “The increased capacity is welcomed, especially in the three to five star qualities.”

Investors in the sector are targeting conference and business travellers as well as leisure tourists who come into the country via Nairobi on their way to other tourist destinations.

Nairobi has become a major hub in the region connected by international airlines. Multinationals have in the past couple of years shown interest in the city setting up offices in Nairobi, raising its profile as a major business destination.

Business travel accounts for about 20 per cent of all arrivals in the country, second to leisure, which contributes 55 per cent.

Kenya Tourist Board statistics show the number of visitors increased by 32 per cent to 549,083 in the first-half of the year.

Earnings grew by 32 per cent during this period to Sh40.5 billion.

This year is expected to be the best for the sector despite the current security fears that has seen an international conference cancelled.

The new facilities are expected to increase competition in the market, even though players say there is enough demand to sustain the new properties. The current occupancy hotel rate in the city ranges between 60 and 80 per cent, said Mr Macharia.

“Nairobi still has room for more.”

The EKA Hotels, by SAMCO Holdings, will put into the market 170 rooms in February 2012 and four conference rooms.

The property, which is betting on its location on Mombasa Road to attract business, seeks to tap local conference market and business travellers.

Mr Charles Kikuvi, the EKA Hotel’s sales and marketing manager, said that conference business is expected to account for about 50 per cent of its business. The hotel also targets leisure travellers on a one-day stop in the city.

“Demand is increasing as the city grows,” he told the Business Daily at the hotel’s construction site.

The Belgium based Rezidor Hotel Group is expected to open the five star Radisson Blu in Upper Hill early 2013, according to its website. The hotel, which is owned by Elgon Road Development, will put in the market about 240 rooms.

Rezidor this year signed an agreement with AMS Hotels to build a 126-bed boutique hotel in Westlands.

The Park Inn by Raddison is expected to open its doors towards the end of 2013.

“Our business is managing hotels. In line with our strategy over the past 10 years, we have completely divested ourselves of real estate and own no properties,” said Mr Andrew McLachlan, the Rezidor’s business development vice president for Africa and Indian Ocean Islands, earlier in the year.
Hemingways Collection, whose property in Karen is expected to open in August next year, and will add 45 luxury suites in the market.

The company, which owns other luxury properties across the country, is looking to add the city unit to its circuit.

Stream of income

In 2008, the Red Cross opened up Red Court Hotel to boost its stream of income and is looking at opening a second unit, The Boma, in the next few of months. The property will have 148 beds.

Simba Group, which is expanding its business into the hospitality industry, is set to invest no less than Sh2 billion in a five-star flagship property of about 200 rooms.

The hotel, on Chiromo Road, is expected to open in the first quarter of next year.

A recreational park is to replace the heap of filth at the Dandora dumpsite in Nairobi as City Hall prepares to move its garbage collection point to a new site early next year.

Besides the park, the council will also build a gas plant and a waste material recovery plant at the Dandora site.

City Hall last week announced plans to start decommissioning the Dandora dumpsite in January under an initiative funded by Japan International Cooperation Agency (JICA).

The process will go hand in hand with the commissioning of a landfill in Ruai, another proposed venue for gas and electricity generation.
These projects will be implemented in partnership with private companies as part of the council’s drive to open a new revenue stream under the devolved government.

“The timeframe for these projects depends on the outcome of the negotiation between governments of Kenya and Japan early next year as well as the feedback from the ongoing public hearings,” said Isaac Muraya, City Council’s director for environment.

The planned capital projects are expected to significantly raise City Hall’s internal generated revenues which stand at Sh9.6 billion according to the council’s 2010/11 budgetary estimates. Previous estimates put monthly earnings from the proposed electricity project alone at Sh150 million.

Council Hall has already submitted an Environmental Impact Assessment (EIA) reports for both the Dandora and Ruai sites to environmental regulator outlining its new land use.

It also plans to start conducting feasibility studies on each of the proposed projects from December. According to its masterplan, JICA expects the full decommissioning of the Dandora Dumpsite to extend to 2016. Just like the gas and electricity generation plants, the waste material recovery facility is expected to attract ready capital from the private sector.

However, City Hall has indicated it will prefer to set it up on its own as part of its public infrastructure programme.

A material recovery facility is specialised plant that sorts waste materials according to their type, making it easier to isolate recyclable ones for further processing into products for sale.

The council’s plan is expected to get quick nod from National Environmental Management Authority (Nema) which has previously pushing for a shift to landfills rather than open waste disposal methods.

“Basically, the site where the Dandora garbage lies belongs to City Hall and it can put it to any use deemed fit as long as its EIA is approved,” Zephania Ouma, Nema’s deputy director of compliance and enforcement told the Business Daily.

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